China is reaping the rewards of its massive mining investment in the Democratic Republic of Congo (DRC) in the form of surging imports of physical copper.
Shipments of refined copper from the central African country jumped by 71% year-on-year to 1.48-million tonnes in 2024. The DRC is now by some margin the largest supplier of refined metal to the world’s largest buyer.
Chinese operators dominate DRC’s copper belt and the flow of metal between the two countries is emerging as a new structural dynamic in the global market.
However, it is one that risks diminishing the usefulness of reading China’s copper import pulse as a gauge of Chinese demand.
Total imports of refined copper last year were the second highest on record, but how much was demand pull and how much African supply push?
An unprecedented flurry of Chinese exports burst copper’s bull bubble in the middle of last year, dousing a market narrative of shortage.
But the unusual outbound flows were occasioned by an equally unusual dislocation of global arbitrage caused by a squeeze on the CME copper contract.
About 17,000-tonnes were shipped directly to the US but most of China’s exports went to London Metal Exchange warehouses in Taiwan and South Korea to capitalise on the price spike.
The outbound flood slowed to a trickle in the second half of the year. Imports, which had remained surprisingly steady even during the export surge, accelerated over the closing months of 2024.
Indeed, total imports of refined copper rose by 8.6% year-on-year to 4.04-million tonnes in 2024, a level exceeded only in 2020, when imports reached 4.67-million tonnes.
China’s own production of refined copper also rose by a robust 5.4%, or 620,000 tonnes, last year, according to local data provider Shanghai Metal Market.
The combination of strong domestic production and high imports signals a demand recovery that is not confirmed by either macroeconomic indicators or by the copper price.
China’s official PMI showed manufacturing activity contracting in January, while LME three-month copper is struggling to hold the $9,500 per ton level let alone challenge last year’s highs above $10,000.
China’s copper imports may be rising simply because the DRC’s production is rising and the country’s output goes by default to China.
China’s CMOC Group has swamped the cobalt market with excess supply from its DRC operations but the cobalt is just a by-product of the copper. The company’s copper output has surged, jumping by 55% year-on-year to 650,000 tonnes in 2024.
Other Chinese operators are also still ramping up their copper investments and the DRC has overtaken Peru as the world’s second-largest producer after Chile.
Chilean metal used to dominate China’s copper import mix but shipments fell to an 18-year low of 578,000 tonnes in 2024 and accounted for just 14.3% of the total intake.
The DRC’s share of Chinese copper imports has risen from 10% in 2020 to 36.7% with volumes steadily increasing over the fourth quarter. December's imports of 167,735 tonnes were a new monthly record.
The Lobito Corridor project, which will upgrade the railway between the Angolan port of Lobito and the DRC’s copper mines, should facilitate more exports to the West. Lobito Atlantic Railways transported its first shipment of DRC copper destined for the US in August last year.
But Chinese-owned mines can be expected to continue shipping most of their metal to China unless there is a strong financial incentive to redirect it to other markets.
The incentive is unlikely to come in the form of exchange delivery.
CME has no registered brands of DRC copper and the LME has only two — “SCM” and “Comika”. They represent 122,400 tonnes of annual production, which is a drop in the DRC’s copper production. Registered LME stocks of DRC copper stood at just 3,775 tonnes at the end of December.
The Shanghai Futures Exchange doesn’t have any registered DRC brands either, meaning that the metal tends to trade at a discount in the Chinese domestic market.
The lack of exchange delivery options has caused the DRC’s supply surge to bypass visible stocks and head straight for the shadows of the Chinese physical market. There’s no reason to expect that to change as the DRC takes its place as the core component of China’s drive for supply-chain security.
As the DRC’s production expands, so too will the flow of metal to China, whatever the state of Chinese demand.
Reuters
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